SAIC Q2 Earnings Beat: Will Strong FY25 Guidance Lift Shares?

Core Viewpoint - Science Applications International Corporation (SAIC) reported better-than-expected results for the second quarter of fiscal 2025, with adjusted earnings of $2.05 per share, surpassing the Zacks Consensus Estimate of $1.86 [1][2]. Financial Performance - Revenues increased by 1.9% year over year to $1.82 billion, exceeding the consensus mark of $1.8 billion, driven by organic growth and new business wins, despite challenges from contract transitions [3]. - Adjusted EBITDA was $170 million, down 2% year over year, with the adjusted EBITDA margin contracting by 40 basis points to 9.4% [3][6]. - Net bookings for the fiscal second quarter were $1.2 billion, resulting in a book-to-bill ratio of 0.6, with an estimated backlog of signed business deals at $22.9 billion [5]. - Selling, general and administrative (SG&A) expenses decreased by 12.5% to $77 million, with SG&A as a percentage of revenues declining from 4.9% to 4.2% [5]. Business Structure and Guidance - Effective February 3, 2024, SAIC reorganized its business structure into five new customer-facing business groups, which are combined into two reportable segments: Defense and Intelligence, and Civilian [4]. - The company reaffirmed its fiscal 2025 guidance, projecting revenues in the range of $7.35-$7.50 billion and adjusted earnings between $8.10-$8.30 per share [8]. - SAIC expects adjusted EBITDA in the range of $680-$700 million and free cash flow between $490-$510 million [9]. Balance Sheet and Cash Flow - As of the end of the fiscal second quarter, SAIC had cash and cash equivalents of $48 million, down from $49 million in the previous quarter [7]. - Long-term debt was reported at $1.97 billion, a slight decrease from $1.99 billion [7]. - The company generated operating cash flow of $138 million and free cash flow of $241 million during the fiscal second quarter [7].